background image background image background image

Monthly Macro Outlook: Looking forward to 2020

Picture of Christopher Dembik
Christopher Dembik

Head of Macroeconomic Research

Summary:  The fear of upcoming recession has significantly increased since the summer. Yet, the economic outlook is far from being as bad as it may seem. The G10 economic surprise index is standing at its highest level since September 2018. It may be seen as a contrarian view, but if you combine this with the monetary push coming from the main global central banks and expectations of fiscal stimulus, then maybe we avoid a recession. At this stage, we cannot exclude a positive growth surprise going into 2020.

China: Getting prepared for lower growth

The latest data confirm the macroeconomic environment remains challenging for China. China’s credit impulse, which leads the real economy by 9 to 12 months, has improved since Q3 2018, but the inflow of new credit is not stimulating yet the economy on a broad-based level. Domestic demand is still weak, as pointed out by the latest import figures (Q2 total imports were down 3.9% versus minus 4.4% in Q1) and by the contraction in auto sales (minus 3.4% YoY in August). Compared with previous quarters, data are slightly improving, but the domestic economy is still under severe stress. On the top of that, the export industry is suffering from external headwinds, notably the impact of trade war and lower global growth. The latest new exports orders data are slightly better, including for small and medium companies, but they are still deeply in contraction territory. Industrial production is also sharply decelerating, at 4.4% YoY in August, which will weight negatively on GDP performance in Q3 and Q4 this year.

Stimulus is kicking in well in infrastructure and in the real estate sector, which represents roughly 80% of Chinese people’s wealth. Completed investment in real estate – a key driver of growth – continues to grow more than 10% YoY, which was the case almost all year long. We believe that as long as the real estate sector will stay well-oriented, China will refrain from a massive easing which has been constantly awaited by market participants over the past months. In our view, China is fully aware that a massive credit stimulus program, as was the case in the wake of the global financial crisis, implies high costs for the Chinese economy. Not only it is likely to increase bubbles and misallocation of capital but, in addition, the effectiveness of credit stimulus is questionable: the country needs twice as much units of credit as in 2009 to create one unit of GDP. 

Recent comments from PBoC’s officials to foreign counterparts seem to corroborate this view. Chinese officials are getting the market prepared for lower growth, probably below 6% next year. They want to make clear that there is political tolerance for a lower growth level and that it will not be a problem for the economy. At this stage, the market does not seem fully prepared to this shift, so Chinese officials will have to implement appropriate pedagogy in coming months in order to avoid negative investor sentiment.

Rest of the world: A welcomed policy reversal

As China is implementing a fine-tuning policy, other countries need to take the lead in order to stimulate the global economy. We bet on central banks going big in coming months and fiscal stimulus popping up to cope with China’s importing less, trade war friction and global slowdown. According to our count, more than 40 central banks over the world have reversed their monetary policy in the past few months in order to ease. As we all know, fiscal and monetary push take some time before having a positive effect. In other words, it means it’s going to get worse (Q3-Q4 2019) before it gets better (Q1-Q2 2020).

Our favorite macro gauge, the global credit impulse, which is based on the flow of new credit from the private sector in the 18 biggest economies and expressed as % of GDP, is finally turning. It leads the real economy by 9 to 12 months and currently points out to a potential global growth rebound in H1 2020, mostly driven by the United States. Based on our latest update, US credit impulse stands at its highest level since early 2018, at 1.2% of GDP. The positive trend is also visible in demand for C&I loans which has been solid over the past quarters, reaching a peak at 9.3% YoY in Q1 2019.

Considering the United States is in late cycle and impacted by the trade war, the economy is rather resilient: housing data rebounded in August, with positive surprise for building permits and housing starts, and US consumer spending are very strong, probably related to mortgage refinancing and lower rates. It seems that US households are already adjusting to monetary policy pivot and the new low rate environment, which drives away the specter of recession.

In Europe, we think that a technical recession is a done-deal for Germany, but not so much for the UK. The combination of stockpiling and positive consumer sentiment ahead of Brexit deadline could postpone once again this scenario. Despite growth slowdown is broad-based in Europe, we don’t expect much from ongoing 2020 debates over budget. The problem is that a fiscal push in Europe is dependent on Germany’s good will. In theory, the country could announce a massive fiscal stimulus up to 5% of GDP and still respects Maastricht criteria. However, based on the latest debates in the Bundestag, it is unlikely to happen. The only events that could change the mind of German politicians and move them away from fiscal conservation are a hard Brexit and/or US tariffs against Europe (following US’s victory in Airbus case). 

In emerging markets, the situation is completely different. Most countries have plenty of room to accommodate the global slowdown. Unlike the period preceding the global financial crisis, no major emerging country is constrained both on the fiscal and monetary space. Some, like Russia and South Korea, can even accommodate on both. What is certain is we focus a lot on what the ECB and the Fed are doing, but the evolution of global growth will also be very dependent on emerging markets policies this time. 



The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.